Dr. James Njuguna Mwangi (born 1962) is a Kenyan accountant, career banker, businessman and entrepreneur.
In this story, James Mwangi, CEO of Equity Bank, narrates his growing up experience, entrepreneurial journey building one of Kenya’s biggest and most inclusive bank in Africa.
During an interview, Mwangi revealed that he lost his father during the fight for independence in Kenya. That time he was a young boy.
“My father fell a victim to the struggle,” James Mwangi told me when I interviewed him in London shortly after he had received his award. He was the sixth of seven children.
“My widowed mother had to find ways and means to feed and raise us in a deeply rural setting.”
There was no time for childish games – everyone had to pitch in to keep the home fires burning. James, like the rest of his siblings, had to put in his share of chores – tending to the livestock, making charcoal, selling fruits and other produce for small margins.
Although the family was poor, “my mother ensured that we were disciplined and she laid out a set of values which became anchors in our lives,” Mwangi recalls.
“There was one point on which she was not prepared to back down or compromise one iota – that was education. She decided that her children, all her children, would be educated – no matter what it took,” Mwangi said.
As Mwangi talked, a picture of the mother, Grace Wairimu, began to emerge. Here was a woman, well past the first flush of youth, who was straining every sinew and using all her ingenuity not only to feed and clothe her children, but was adamant that they not only go to school but learn.
When she insisted that her daughters also attend school, a shudder of apprehension went through the village of Kangema, their home. Girls did not go to school. There was a lot of shaking of heads, but Grace Wairimu was adamant. Perhaps this inured the young James Mwangi to criticism and allowed him to ignore a lot of head shaking later in life when he was trying to breathe life in a defunct organisation.
Despite enormous social and financial problems, Grace Wairimu ensured that all her children were educated. “Much later,” Mwangi remembers, “when I had my own four sons, their granny supervised their education and kept them away from harmful teenage activities going around. When they got their school reports, they first went to their granny, rather than me, their father. She passed on a wealth of wisdom through storytelling and, in many ways, moulded my family.”
Mwangi’s children have attended the famous Ivy League institutions in the US – Yale, Cornell, and Brown – and Carnegie Mellon. “When she had placed the last one in university in the US,” he said, “she rested.”
Grace died at the age of 98, exactly one year to the day to when we were having our interview. Given the enormous role she had played in his life, I glanced at Mwangi to look for signs of sadness. But I only saw pride for his late mother shining in his eyes. Somehow I knew that when he received his award, he had raised it in silent tribute to his mother.
James Mwangi attended the Nyagatugu primary school in Kangema village. But money was short and the family teamed up to supplement their income by engaging in ‘small business’. While this may have been humbling for the boy, he was nevertheless absorbing invaluable business lessons that would stand him in good stead in his future.
He was learning, without consciously doing so, the basics of business – what people needed, what they were prepared to pay, how to add value to mundane articles, how to negotiate, how to make a sale and turn a profit. With no role models to emulate, he and his family were in effect, discovering the basics of business all by themselves based on observation of what worked and what didn’t.
He obtained outstanding results at the end of his primary schooling and this provided a government scholarship to attend the Ichagaki Secondary School. Here he was introduced, for the first time, to accountancy and commerce.
“This was an important discovery,” he recollects, “I could see how the systems related to the small businesses we had been doing. We had been going about ‘business’ in a haphazard way but here was a systematic method of doing the same things with far better results. It was an eye-opener.”
Once again, Mwangi obtained outstanding O level results and went to Kagema High School to read his A levels in economics, literature and geography. Whatever he was picking up in theory, he was mentally applying to real life situations and his earlier, unformed brushes with commerce. He obtained a bachelor’s degree in commerce from the University of Nairobi, passed a Certified Public Accountancy course and was ready to face the daunting and mysterious world of work.
The Equity saga
At the age of 28, although he himself did not know this, James Mwangi was primed, in terms of character, values and down-to-earth business savvy for the major role he was about to play in the nation’s commercial life.
Kenya was going through an uncomfortable transition phase from the old colonial structures to the needs of the relatively new nation. Although there was a huge demand for banking and credit services, the industry remained more or less a closed shop. The vast majority were simply shut out of the financial system. The international banks turned their noses up at the prospect of catering to the masses. This led to the growth of numerous indigenous mutual societies.
Many of those who started these savings societies did so with the best will in the world but lack of expertise meant they were trying to learn the ropes while on the run. The result was a series of crashes with hard-earned money from depositors – many of them small-scale rural farmers – vanishing at an astonishing rate.
One of these mutual societies, which had remained standing but was severely battered, was Equity Building Society. In 1993, the chairman, Peter Munga and the CEO, John Mwangi turned to James Mwangi, who had established a reputation for honesty during a period when that commodity was in very short supply, to help wind up the business. It had already been declared technically insolvent.
“That was an understatement,” Mwangi told me. “To cut a long story short, the building society had been making losses of Kshs5m ($58,000) every year and was now facing a cumulative loss of Kshs30m ($350,000), the staff had not been paid salaries, morale was at rock bottom and membership was dwindling by the hour.”
But rather than throw in the towel, Mwangi wondered if he could intervene and ‘reinvent the organisation, transform it completely.”
He became the strategy and finance director. At the time, Equity had 27 employees, 27,000 customers, five branches and stood at number 66 out of 66 in the financial sector rankings.
“I accepted the challenge because I could see clearly how important a properly functioning society was to the masses. Micro credits, which would make a huge difference to people’s lives, was their only avenue out of poverty. I felt I had to do something – somehow square the circle.”
But he had no resources, no money, no way of raising capital. A banking licence, which might have provided some leeway, was not forthcoming. Public confidence in indigenous organisations was at rock bottom.
“How could I entice people to come to Equity? What could I provide that was needed but not available? I decided to look inside the organisation. If I could change the culture internally, I would have in effect succeeded in reinventing Equity.”
Mwangi set about retraining the staff. He introduced a concept which at the time was practically unknown – customer care. “Put the customer and his or her needs first – he is the most important person in the world. Treat people with dignity and respect. Serve, serve to the best of your ability.”
He encouraged his staff to use their own networks, as he did his, to persuade people to join the society. “I told them, trust me. They believed me because I believed it myself. If you expect anyone else to follow you, you must have absolute confidence in yourself.”
What he felt most at this time was a heavy sense of responsibility. “I knew I could not let down the Chairman and CEO and above all, I could not let down the customers. When I said ‘trust me’, I meant to keep my word.”
The first sign of success, he said, was a complete change in the attitude of the staff. They were now motivated, they had a direction to follow and what they were doing was bearing fruit.
“We were able to give them their first raise in eight years. I also persuaded them to use 25% of their salaries to buy shares in the company. Now they were involved. It was as much their company as anybody else’s. They knew that if they succeeded, they had a lot to gain.”
Slowly but surely like a ship that was almost underwater, the company began to right itself. Customers, many of them peasant farmers, were given the red carpet treatment. Accounts were kept meticulously. Confidence began to blossom.
In Bangladesh, Muhammad Yunus had demonstrated that the Grameen system of micro finance was transforming the lives of millions who had been shunned by the mainstream banking industry. It was also helping the impoverished nation to raise its economy by its bootstraps. But elsewhere, micro finance was seen as something of a charity case – throwing away good money for bad.
Mwangi was convinced that micro finance could not only transform the lives of the masses, it could also turn a profit. Equity’s growing customer base and a healthier sheen to the company’s balance sheet was the proof he needed that the venture was on the right track. Despite the head shaking within the industry, he and his team ploughed on.
“By 1997, we were ready to expand. We invited customers to buy shares in the company and we started to pay them dividends. The word began to spread – Equity was different; Equity could be trusted.”
Mwangi had witnessed how the power of computer technology was altering business processes out of all recognition. But it was still believed that such advanced technologies were expensive toys for the elite and that the masses were ‘too backward’ for such sophistication.
He begged to differ. In 2000, he persuaded the European Union to support a computerisation programme for Equity as part of their poverty alleviation strategy. The impact was instantaneous. “Transaction times dropped from 30 minutes to five; queues disappeared; the process, including signatures and so on, was automated. Equity was now on a rapid, but solid growth path.”
But expansion needed an injection of capital which was still very difficult to come by for indigenous companies. Approaches were made to Africap, a funding organisation set up by the International Finance Corporation (IFC) and other partners.
Africap provided $1.6m but demanded 16% of the whole enterprise. This led to a second wave of computerisation and further expansion. But by 2004, the company ran out of capital and invited private placements. $10 million was raised in two weeks.
“On the last day of August, 2004, we made our biggest and boldest step. We became a bank,” Mwangi said. “We could now roll out a full range of products and services.”
In 2006, Equity Bank listed on the newly established Nairobi Stock Exchange (NSE). More capital, this time from the giant Helios fund supported by IFC, CDC and Opic who bought 25% at $185 million, allowed the bank to become the most computerised in East and Central Africa.
“Now, building on the IT platform, we launched an aggressive growth campaign. In five years, we increased our branches from 36 to 450 and the customer base rose to 8m, nearly half of all bank accounts in Kenya,” Mwangi told me. The figures are mind boggling: From a loss of Kshs5m ($58,000) in 1993, the bank registered a profit of Kshs12bn ($140m) in 2011. Equity now has the largest customer base in East and Central Africa, and is the most profitable in East and Central Africa.
Since listing on the NSE in 2006, shareholder value has grown 900%, turning a large slice of shareholders into millionaires.
Mwangi expects profits to rise to Kshs 15bn ($175m) this year, making it the most profitable company in the region. The compounded annual growth rate over the past 10 years has been an incredible 78% and the bank has been growing tenfold every five years for the last 20 years. From a staff level of 27, Equity now employs just under 8,000.
Innovations such as mobile banking – taking the bank to the people in remote areas – and agency banking, where customers can carry out transactions in shops, has made this once given-up-for-dead institution the most progressive on the continent. In the process, it is spreading entrepreneurship, creating jobs and wealth.
The bank has expanded regionally and now has a welcome presence in Uganda, Tanzania, Rwanda and was among the very first financial institutions to open a branch in the new country of South Sudan.
Stranger than fiction
The story of James Mwangi and Equity Bank – from a young boy selling charcoal on the slopes of the Aberdares to becoming the most successful banker in the history of modern Africa – is so incredible that it rightly belongs in the realms of fiction. In this case, fact is far stranger than fiction – and a thousand times more inspiring.
But he remains humble and cheerful, ready to make a joke at the first opportunity. He has never forgotten the struggles of his childhood; he has set up a series of foundations to ensure that no deserving youth will miss out on education, nor will anyone lose opportunities through lack of financial knowledge.
He spends half an hour every day running on the treadmill and is a voracious reader. “I am up at 3am every day and I read – mostly business and management books and biographies,” he said.
His role models? “Nelson Mandela. The way he has changed people’s lives inspires me every day. That is what drives me – the feeling that I am changing lives for the better, being an agent of social-economic transformation in Africa.”
Among his business gurus, he counts Jack Welch, the former CEO of General Electric, Bill Gates, who he says showed him how to think more broadly about society, Bill and Melinda Gates for their contribution to the disadvantaged in Africa and Steve Jobs for his technological genius.
What makes him most happy? “Whenever I can bring a smile to someone’s face, I am amply rewarded.”
